Accrued and prepaid income in the extended trial balance

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GemmaS
GemmaS Registered Posts: 178 Beyond epic contributor 🧙‍♂️
in AAT Level 3 (Level 6 in Scotland)
Ok, so I really thought I had this sorted out in my head.... until I went through a practice paper last night got everything wrong and now I am in such a mess!!!!! The accrued and prepaid expenses are fine, its just the income and what to do on the ETB and the double entry into the accounts that are all mixed up in my head. I tried to post to the accounts and had everything completely wrong. I tried to show where things went on the trial balance and got even more confused!

Can anyone help me please?!?! I've been trying to find a simple step by step guide on the internet on what to do in the T accounts and in the trial balance for each process but its confusing me even more....

:crying:

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  • crispy
    crispy Registered Posts: 466 Dedicated contributor 🦉
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    Hello, simple example that may/may not help.

    Just say for example you had rented out part of your warehouse for £1,000pm and your Year End was 31/12.

    If at 31/12 you had Invoiced for £ 11,000 (covering Jan to Nov) at Year End you would enter the following journal:

    Dr Prepayments & Accued Income (Balance Sheet) £ 1,000
    Cr Rent Income (P&L) £ 1,000

    Or, if at 31/12 you have invoiced for £ 13,000 (covering Jan to the following Jan) at Year End the journal would be:

    Dr Rent Income (P&L) £ 1,000
    Cr Accruals & Deferred Income (Balance Sheet) £ 1,000
  • omega man
    omega man Registered Posts: 283
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    Crispy i think thats confusing.
    I would put things another way,prepaid expense and accrued income are assets,and prepaid income and accrued expenses are liabilities.
  • GemmaS
    GemmaS Registered Posts: 178 Beyond epic contributor 🧙‍♂️
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    Hi, thanks for the replies :D

    I get the bit about assets and liabilities, its the physical act of putting things onto the ETB. Do I use the adjustment columns for prepaid and accrued income in the same way that i would for expenses or do I do all of the adjustments in the relevant 'T' accounts BEFORE it goes onto ETB so I can show the balance b/d from the previous year? if this is the case which column would I put the accrued and prepaid income into in the SFP, the same row as the accrued and prepaid expenses or a different one?

    Hope this makes sense :)

    (ps omega man get some sleep! I thought I was bad studying at 2am this morning but 4.26am is dedicated!!!!! lol :001_tongue:)
  • omega man
    omega man Registered Posts: 283
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    Hi-Gemma First of all i have finished my level 2+3 just waiting for two exam results.I am not working and i stay up late doing allsorts of things.
    Yes you need to do your T accounts first remember an ETB is done after you have balanced all your accounts off.As to where on the ETB well when you have balanced off it will be a debit or a credit so there is your answer.
    SFP- here you may have multiple prepayments and accruals and I know this might be hard to believe,but you can have prepayments and accruals on both the asset and liability side,but its rare, however you need to know that fact.
    Hopefully this helps.
  • GemmaS
    GemmaS Registered Posts: 178 Beyond epic contributor 🧙‍♂️
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    Thanks! that's what was confusing me... the part about having both debit and credit accruals or prepayments on the same row :)

    Fingers crossed for your exam results! how long have you been waiting?
  • omega man
    omega man Registered Posts: 283
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    My last 2 exams were 19/20June and i have a 2 week wait,or maybe a bit less depending on when my tutor marks my exams.
    They are CMPA-level 2 and SPSW level 3

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